New Public Management

New Public Management INTRODUCTION Public sector reforms adopted in a number of countries such as USA, UK and New Zealand in the last fifteen years and characterised by efficiency units, performance management, contracting out, market type mechanisms, and agency status have come to be known as the New Public Management or NPM. Appearance of the NPM as shifting the paradigm from the old traditional model of administration has been promoted by a remarkable degree of consensus among the political leadership of various countries and is presented today as the major tool for public sector management reforms. The elements of NPM have been implemented in diverse forms in different countries depending on their historical nature of bureaucracy and public sector management and reform objectives. For instance, more emphasis was given to performance management in Scandinavian countries, while a stronger accent was on market type mechanisms, contractualisation of the public service and systematic approaches to improving service quality in New Zealand, the UK and the USA. The long-term benefits from these reforms have not been empirically validated. Nevertheless, the major donors are agreed that what developing countries must do to improve public sector management is to sweep away the traditional public administration paradigm that underpins their bureaucracies and introduce the new public management (Turner and Hulme 1997: 230). Mongolia has not escaped from this trend.

The Government of Mongolia is preparing to introduce public administration reforms based on the New Zealand experience of contract relationship between resources used and outputs purchased. However, there is a question mark about Mongolias capacity to implement such reforms and wether they meet current needs. Therefore, assuming that the concepts of NPM are quite familiar, attempts have been made to asses the Mongolian situation against prescriptions of the New Zealand model of Public Sector Reform, particularly in relation with the countrys transitional circumstances. THE NEW ZEALAND MODEL OF PUBLIC MANAGEMENT The proponents of the New Public Management have often identified New Zealand as a good example of this contemporary mode of administrative reform called NPM. New Zealand has implemented an enormous number and range of management reforms since 1988. These include accrual basis accounting and appropriations.

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Budgeting for outputs rather than inputs, separation of service delivery functions from advisory and regulatory functions, replacing permanent department heads with chief executives appointed for a fixed term, discretion for managers to spend their operating budgets as they deem fit, individual employment contracts for most senior managers, annual purchase agreements between ministers and their departments, annual reports, and audited financial and performance statements (Schick 1998:2). Every element of reform has been designed to establish or strengthen contract-like relationship between the government and ministers as purchasers of goods and services, and departments and other entities as suppliers. This new contractualism replaced the relational contracts that characterise traditional public administration (Schick 1998:3). Managerial reform is based on a simple principle: managers cannot be held responsible for results unless they have freedom to act, that is, to spend and hire within agreed budgets as they see fit, to make their own choices concerning office accommodation and other purchases, and to run their organisation free from ex ante control by outsiders. The New Zealand experience shows how effective management practices in the private sector can be brought into a public sector environment and adapted.

The change was driven by ideas that have only recently entered mainstream economics and they have been applied with full fidelity to their internal logic. Although one can justify that the country has vastly enlarged the stockpile of public management ideas and practices, however, there remain concerns related to contract-like arrangements in the public sector and there is much more to be accomplished before a final assessment can be made (Schick 1998:4). TRANSITIONAL FEATURES OF PUBLIC ADMINISTRATION IN MONGOLIA After the collapse of the socialist block, radical political and economic changes occurred in most former socialist countries. According to Hesse (1993) the former socialist countries have a number of common characteristics, such as: ? a transition from one party rule to a multi-party, pluralist system with democratic and accountable government; ? the deconcentration and decentralisation of political power; ? the creation of distinct spheres of economics and politics; and, ? economic liberalisation. No socialist country has yet completed the full process of economic liberalisation. This is mainly because the task of transforming a former socialist economy is significantly more complicated than the issues facing a typical developing country. In many cases even rudimentary institutions that can be easily converted to market concepts and terminology.

The process can be characterised not simply by a transition to a new economic system but also as a fundamental transformation of the whole society and all of its institutions in line with the market philosophy. Earlier literatures on civil service reforms in developing countries indicate that strategically administrative reform was successful, when it was implemented as part of the main economic and political change. There was less chance of its success, when it was undertaken on its own as a separate activity. Unfortunately those who are involved in the design of main economic and political change strategies underestimate the fact that administrative change needs to be undertaken before or together with economic and political change. It is often assumed that there is no political support and not adequate financial and technical resources to undertake public administration reforms.

As a result public administration lags behind other sectors and is often criticised for being an obstacle to reforms in other sectors. This characterises the current situation in Mongolia. Despite the profound political and socio-economical changes, which have taken place in Mongolia since 1990, public administration remained the same until recently. The organisation and activities of all levels of the former public management institutions were no longer appropriate for attaining the goals of the reforms in all spheres of economic and political life. This finds its expression in the weakening of the prestige of all state institutions, their inefficient and non-operational activities, and also the ineffectiveness of Mongolian legislation and decisions of public and management institutions. The lack of public administrative mechanisms able to replace the party-centred system at the initial stage of the transition period led to a weakening of Governments leadership and regulating activities. For instance, national capacity has been reduced in the areas of policy and planning due to the abolishment of planning mechanisms as part of the discontinuation of central planning. However, market economy policy and planning mechanisms have not yet replaced the previous systems.

It is wrong to presume that a free market will develop overnight if central planning is eliminated and the market freed. Scrapping the central planning system is obviously a necessary step toward the evolution of a market economy, but unless existing institutions can readily be converted to facilitate production and distribution under market conditions, the transition process will be difficult and lengthy (Rana 1995:1168). PUBLIC ADMINISTRATION REFORM PROCESS IN MONGOLIA The Government of Mongolia is currently engaged in major public sector reforms intended to complement the increasingly market-oriented economy. These reforms are designed to improve government decision making and accountability, and the cost-effectiveness of service delivery. The intent is to redesign the structure of the public sector, and to remove old institutional arrangements and ingrained habits derived from the earlier period of centralised planning that are major obstacles to improving efficiency and accountability.

The nature of the public administration reforms in Mongolia is influenced in part by the perspective that has guided reforms in New Zealand since 1988. In January 1997, the mission from the International Monetary Fund (IMF) visited Mongolia to carry out the preparatory work for the new Enhanced Structural Adjustment Facility agreement between the IMF and the Government of Mongolia and prepared an aide-memoir with recommendations with regard to the public administration reforms. According to the assessment by the mission the primary emphasis of the public administration reform do date appears to have been on organisational and administrative change and has not been linked to reform of the budget process and public expenditure management considerations are not well reflected in the current statement of policy. Also the Ministry of Finance appears to play a relatively small role in its implementation. The main recommendations of this mission to the Government of Mongolia concerning the public administration reform were the following: The Ministry of Finance (MoF) should immediately take on a central role in further development of the public sector reforms and these reforms should be integrated with the budget process by taking into account budget constraints and the need for improved financial accountability. ? Devolution of financial powers to agencies (along the lines of the New Zealand model) should proceed only …


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